Indexes’ closings suggest 2003 a good year

Alicia Robinson

In keeping with the year-end gains shown by the three major stock

market indexes, local investment experts said the market seemed to

recover during 2003.

The Dow Jones industrial average ended the year at 10,453, up more

than 25% from where it closed Dec. 31, 2002. Standard and Poor’s 500

closed at 1,111, a nearly 27% gain from where it was a year ago. The

Nasdaq Composite appropriately finished out 2003 at 2,003, about 50%

higher than it was at the end of 2002.

Of the three indexes, only the Nasdaq closed Wednesday lower than

it opened that morning. All three had leaped higher on Monday, edging

toward ending the year on a high note.

“The markets performed very well this year,” said Tom Lydon,

president of Global Trends Investments in Newport Beach, an

investment advisory firm managing $50 million in assets.

The economic decline that started in 2000 was the result of the

technology bubble, high interest rates and a floundering economy, he

said. Interest rates at 40-year lows and a booming real estate market

helped the economy bottom out around March, and the market has

climbed since then.

“After four years, we finally had a good year in the stock

market,” Lydon said. “People are finally starting to feel a little

more confident in the market.”

While the market has been headed upward since the spring, it’s not

back to the levels it reached in 2000, said Peggine Tellez, an

investment representative at Costa Mesa’s Edward Jones, the country’s

fifth-largest investment firm.

Some technology firms haven’t completely bounced back, but other

sectors, such as financial companies, did well this year, even in a

“bear,” or slow, market, she said.

But the experts’ predictions were mixed as to how long the rally

will last.

Lydon expects the fledgling economic recovery to take wing in

2004.

“We’ve gone through some challenging times, but we seem to have

gotten through most of it,” he said.

Interest rates are projected to stay low, and election years are

historically good for the stock market, he said.

“I think that the key for going forward is trying to invest based

on what your true long-term goals are and not going for immediate

satisfaction,” Lydon said.

Tellez offered similar advice: If investors diversify their

portfolios with an eye to long-term returns, 2004 should be a good

year for them.

“I think we’re starting to see that 2004 is going to be a

continuation of the improvement in the market,” Tellez said.

But Chip Hanlon, domestic strategist for Euro Pacific Capital,

said investors buying into what they think is a lasting economic

recovery will be disappointed.

Newport Beach-based Euro Pacific Capital is an investment firm

with $250 million in assets under management.

While the market performed well on paper, its real returns weren’t

high, and it did poorly compared with other markets around the globe,

Hanlon said.

In addition, the dollar fell nearly 20% in value and can only be

shored up by an increase in interest rates, which will hurt the

housing market, he said.

After the great crash of 1929 the market experienced a brief,

unsubstantial rally similar to today’s conditions, Hanlon said.

“The rally of 2003 was not the start of a new bull market,” Hanlon

said. “I think this is destined to be another rally that time

forgets.”

* ALICIA ROBINSON covers business, politics and the environment.

She may be reached at (949) 764-4330 or by e-mail at

alicia.robinson@latimes.com.